SINGAPORE (EDGEPROP) - Following months of speculation by the industry amid a buoyant market, the government has introduced a new set of cooling measures that will take effect immediately.
The last set of cooling measures were introduced back in July 2018.
Among others, the additional buyer’s stamp duty (ABSD) for Singaporeans buying their second residential property has been raised to 17% from 12%. For the third and subsequent properties, it is now 25%, up from 15%. ABSD for foreigners has been hiked to 30% from 20%.
Meanwhile, ABSD for entities buying residential property has been raised to 35% from 25%. For developers, there’s an additional 5% that is non-remittable on top of the 35% ABSD.
Total debt servicing ratio (TDSR) has been tightened to 55%, from 60% previously. The loan-to-value (LTV) limit for loans from HDB has also been tightened to 85%, from 90%.
The Government notes that both the private residential and HDB resale markets have been buoyant, despite the economic impact of COVID-19, with private housing prices up 9% since 1Q2020 while HDB resale flat prices up 15% since 1Q 2020, following a six-year decline.
Even though House Price-to-Income ratios may remain below their historical averages, there is clear upward momentum, according to the Ministry of National Development (MND).
Transaction volumes have also remained high despite the pandemic. “If left unchecked, prices could run ahead of economic fundamentals, and raise the risk of a destabilising correction later on. Borrowers would also be vulnerable to a possible rise in interest rates in the coming years,” states MND.
“The Government has therefore decided to implement a set of measures to cool the private and public housing markets, to promote continued housing affordability,” the ministry adds.
The private residential measures are calibrated to dampen broad-based demand, especially from those purchasing property for investment rather than owner occupation.
Measures to tighten financing conditions for both public and private housing will encourage greater financial prudence. The Government will also be ramping up the supply for both private and public housing.
“These cooling measures are calibrated to avoid crashing the housing market,” says Lee Liat Yeang, senior partner, Dentons Rodyk’s real estate practice group. “Of significance is that the ABSD for Singapore permanent residents (PRs) buying their first property has been kept at 5%; a new tier of 25% for PRs buying second property; and those buying their third or more property now put in the same category as foreign buyers, at ABSD rate of 30%.”
Indeed, Lee says the measures “should not stifle the demand of local buyers, especially the first timers and upgraders”.